Opinion
Civil Action #12,412.
Submitted: August 3, 1992.
Decided: December 8, 1992.
ON DEFENDANT'S MOTION TO DISMISS: GRANTED
Gentlemen:
Defendant has moved to dismiss the complaint that, pursuant to 8 Del. C. § 220, seeks an inspection of defendant's stock ledger, its list of stockholders and other books and records. Because plaintiff has failed to comply with the statutorily mandated requirements of 8 Del. C. § 220, defendant's motion to dismiss must be granted.
I.
The plaintiff, Dr. Frank, a shareholder of defendant Libco Corporation ("Libco"), a Delaware corporation, on April 6, 1990 requested by letter that he be given "permission to examine the Libco stock ledger, its list of stockholders and other germane books and records." Dr. Frank's request, while containing a purported notarization, did not state under oath that the contents were true or correct. Libco did not respond to Dr. Frank's request and on January 22, 1992, Dr. Frank, acting pro se, filed a complaint requesting that the Court order Libco to allow Dr. Frank to review and copy the requested records. The complaint was not signed by Dr. Frank.
On February 18, 1992, Libco filed this motion to dismiss. Libco claimed that the complaint failed to comply with Chancery Rule 11 that requires that all pleadings be signed. Libco also asserted that Dr. Frank failed to comply with 8 Del. C. § 220 because his demand was not made under oath. Defendant further asserted that the stated purpose for Dr. Frank's demand, i.e., to learn the names of other shareholders so he could purchase additional shares and to learn the actual value of the corporation, was not a proper purpose under 8 Del. C. § 220.
In an attempt to cure the deficiencies cited by Libco in its motion to dismiss, Dr. Frank, on July 8, 1992, mailed a revised demand letter to Libco that was under oath. This demand letter was received by Libco on July 13, 1992. Two days later, Dr. Frank's reply brief was filed with this Court. In an apparent attempt to cure the Rule 11 signature requirement, that brief included a signed copy of Dr. Frank's original complaint.
II
8 Del. C. § 220 provides in relevant part:
(b) Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom . . .
(c) If the corporation, or an officer or agent thereof, refuses to permit an inspection sought by a stockholder or attorney or other agent acting for the stockholder pursuant to subsection (b) of this section or does not reply to the demand within 5 business days after the demand has been made, the stockholder may apply to the Court of Chancery for an order to compel such inspection. . . .
Libco claims that the original demand letter did not satisfy the statutory requirement that the demand be under oath because an oath is "an affirmation of truth of a statement which renders one willfully asserting untrue statements punishable for perjury," and Dr. Frank's original demand did not state that Dr. Frank swore or affirmed that the contents of the demand letter were true. Black's Law Dictionary 1071 (6th ed. 1990). See also, 10 Del. C. §§ 5321 5323 (oath can be made only by the swearing upon the Holy Evangels of Almighty God or by affirming to the truth of the matter to be testified); 29 Del. C. § 4321(5) ("verification upon oath or affirmation" means statement by a person who asserts it to be true and makes statement under oath or affirmation); Delaware Rule of Evidence 603 (oath requires declaration that witness will testify truthfully).
Dr. Frank contends that the affixing by a notary of his signature on the original demand for inspection of the corporate books and records was sufficient to satisfy the requirement that the demand be under oath.
Under Delaware law, a notary is authorized to administer an oath or affirmation. 29 Del. C. § 4321(3). A notary's verification upon oath or affirmation is sufficient if it includes the sentence: "Signed and sworn to (or affirmed) before me on (date) by (name(s) or person(s) making statement)." 29 Del. C. §§ 4327(b)(1) 4328(3). Perhaps something other than these precise words would be sufficient to satisfy the requirement in 8 Del. C. § 220(b) that the demand for inspection of corporate books and records be under oath. Because, however, Dr. Frank's original demand contained no language indicating either an oath or an affirmation as to the truth of the statements contained therein, it was not sufficient to satisfy the requirements of 8 Del. C. § 220(b). Dr. Frank cites various provisions of Florida law but none of those provisions suggests that his original demand would have been considered to have been "under oath" under Florida law.
This Court has held that the failure to comply with the requirement in 8 Del. C. § 220(b) that the demand be under oath requires the dismissal of the complaint. Haber v. Harnischfeger Corp., Del. Ch., C.A. No. 6930-NC, Hartnett, V.C. (Feb. 3, 1983). Therefore, unless Dr. Frank's attempt to cure the deficiencies of the original demand letter was successful, his complaint must be dismissed.
III
Dr. Frank's second demand letter was dated July 8, 1992 and was received by Libco on July 13, 1992.
Under 8 Del. C. § 220(c), a shareholder may apply to this Court for an order to compel an inspection of corporate books and records if the corporation does not reply to a demand "within 5 business days after the demand has been made . . .". Defendant cites Weisman v. Plains Resources, Inc., Del. Ch., C.A. Nos. 10,814 10,840, Berger, V.C. (June 1, 1989) for the proposition that a shareholder must wait a minimum of five business days after the corporation has received the letter before filing suit and that the waiting period is a "jurisdictional prerequisite". Therefore defendant claims any action that is filed before the five business days have passed must be dismissed as premature.
Defendant, however, ignores Gay v. Cordon International Corp., Del. Ch., C.A. No. 5541-NC, Hartnett, V.C. (Mar. 31, 1978). In that case a shareholder, whose original demand to inspect a corporation's stock ledger was not submitted under oath, brought suit under 8 Del. C. § 220 to compel the corporation to permit him to inspect the stock ledger. The corporation moved to dismiss the complaint on the grounds that the demand was not under oath. The plaintiff then submitted a new sworn demand to the corporation and, after five business days had passed, moved pursuant to Chancery Rule 15(d) to supplement his complaint to incorporate the second, sworn demand that was made after the complaint had been filed.
This Court granted plaintiff's motion to supplement his complaint to incorporate the sworn post-filing demand. The Court reasoned that the Court of Chancery Rules establish a policy of liberally permitting amendments. The Court also found that it had "the inherent power to do `equity', and the obligation to bring this case to a fair and prompt resolution and to brush aside non-prejudicial technical objections which are primarily tactical." Id., slip op. at 4.
Defendant also ignores the holding in Odyssey Partners v. Trans World Corp., Del. Ch., C.A. No. 7125-NC, Hartnett, V.C. (Mar. 29, 1983) where this Court held that the five business day waiting period does not apply if the corporation refuses the demand before the five days have lapsed.
The Gay and Odyssey opinions preclude a holding that the five business day waiting period is jurisdictional, (in the sense that the Court does not have the power to hear a suit). Gay also shows that, under certain circumstances, a shareholder's failure to make a sworn demand prior to filing suit can be cured by amendment.
IV
In the present case, however, Dr. Frank has not properly cured the deficiencies in his original complaint and his complaint must therefore be dismissed. In Gay, the plaintiff-shareholder submitted a second, sworn demand to the defendant-corporation during the pendency of the litigation but waited until five business days after the corporation had received the demand before moving to supplement his complaint with the second, sworn demand. In so doing, he afforded the corporation the opportunity to determine whether it should accede to the demand that is the purpose for the five day waiting period provided by 8 Del. C. § 220(c).
Dr. Frank, in this case, however, submitted his purported amendment to his complaint prior to the lapse of the statutory waiting period, thereby denying Libco the five-day opportunity granted it by 8 Del. C. § 220 to consider and respond to the demand. While Libco's response, based on its subsequent conduct in this litigation, might have been to deny Dr. Frank's request, this Court cannot eviscerate the statutory five business day waiting period by ignoring it.
The motion of defendant to dismiss is therefore granted, without prejudice to the plaintiff, however, to bring a new suit after a new demand.
IT IS SO ORDERED.